The Redundancy Cycle

I logged on to LinkedIn this morning and the first post I saw was an old colleague of mine advertising a role. Mid-weight designer at the agency I was made redundant from nearly 2 years ago. The role I was doing that, at the time, was deemed redundant! What a slap in the face.

Except that, no, it's not a slap in the face. It's part of a common occurrence known as the "hire-fire cycle", or "cyclical redundancies". Hiring speeds up during times of growth, and firing rears its ugly head during times when business is stagnant. There are peaks and troughs, and employees oftentimes bear the brunt of these. 

In my case, I fell victim to the "post-COVID" boom in hiring. Between 2020-2022, tech and creative companies massively over-hired based on inflated growth assumptions. It was a time of massive excitement; new clients, an ever-growing team, record profits and lots of parties. But this came to a staggering halt, the "boom" only sustainable short-term. The unfortunate outcome of this was an industry-wide wave of layoffs between 2022-2024, which affected hundreds of thousands of workers, with many of those companies now quietly rehiring for those roles.

As someone who was collateral damage during the redundancy phase of this cycle, part of me wonders if I should feel hard done by. But it's simply part of being a cog in the machine, and actually, whilst I suffered the negative consequences of over-zealous hiring, I also reaped the rewards. When I was made redundant, I quickly established a freelance career carried mainly by a contract with a company who had also recently been affected by restructuring. As the company has stabilised, I'm now in the running for a permanent role. 

I think about the people whose place I'm effectively taking, albeit a couple of years later. I wonder if they feel hard done by, or if they'll look at my potential hiring as an affront. I sincerely hope that they don't; whilst we invest ourselves wholeheartedly in our jobs, business is almost never personal. And who knows, maybe they were able to gain a positive outcome as a result of process just like I did.

Whilst redundancies undoubtedly impact the affected employees in the worst way, it's also worth considering the result this process has on the businesses themselves, as more often than not they are negatively impacted too. For example:

• Institutional knowledge walks out the door and doesn't come back
• Morale and trust among remaining employees erodes. Survivors work in fear, and may look elsewhere for a more "secure" role
• Recruitment fees and higher salaries are required to attract replacements, if and when they are able to
• New hires take 6-12 months to reach full effectiveness, resulting in a productivity dip
• Customer relationships that were maintained by now-departed employees become volatile
• Brand damage in the talent market

Unfortunately, the cycle is a rational response to irrational incentive structures, which is what makes it so persistent and so hard to break. Nobody hires for a role anticipating that that person will become surplus to requirements (or unaffordable) in a couple of years time. Wondering why companies continue to fall into this trap, I did some research and found that a key element is the immediate and visible savings available following a redundancy, compared to the diffused spending required to hire. There's also the uncertainty in when growth will return, making the prospect of rebuilding from scratch much more attractive than cost-carrying through the fog. Finally, there is undeniably an element of short-term thinking; if a CFO or Head of Finance can save hundreds of thousands in payroll spending now, the cost of rehiring in a few years feels inconsequential. 

So, how can the cycle be broken? 

• Better forecasting. Overly optimistic growth projections drive the hiring boom. More conservative, scenario-based hiring plans can ensure longer term stability.
• Flexible workforce models. Maintaining a smaller core team and using contractors or project-based hires absorbs fluctuation without dismantling the core team. 
• Target/profit-based variable pay. Not always a popular one and less common in the tech and creative industries, but if pay increases are variable and tied to overall business performance, payroll naturally flexes with the business cycle without requiring headcount cuts.

And at a policy level:

• Stronger redundancy costs, forcing companies to internalise more of the true cost and think harder before cutting. 
  
  

The companies that break the cycle most successfully tend to do so through conviction in culture and strength in leadership rather than structural fixes alone. Leaders who have enough credibility and tenure to say "we don't do this here" might be more likely to make it stick through a downturn. It's a rare approach (and possibly an unrealistic one), but it does exist.

—

When I was made redundant, I felt incredibly let down by my employer. I'd only been there for a couple of years so there wasn't a huge amount of "betrayal" felt, but I compared myself to others who'd been kept on and wondered "what did I do wrong?". I held onto a lot of bitterness and negative feelings as I moved into the next stage of my career and, to my great shame, I almost willed my old company to fail. But in hindsight I can now empathise with their decision and I'm genuinely grateful that it happened, as it led me to my current role where I enjoy greater job satisfaction, a better salary, more structural support and a bigger team to lean on and grow alongside. As my old employer hires a new designer and potentially begins to fully rebuild their team, I hope that they can do so with more stability and a greater understanding of what the future holds (although nobody can accurately predict that!)

To anyone who's just been made redundant: honestly, it's almost never a reflection on you. I was at the higher end of the salary band for my role, making me a sensible choice for redundancy due the greater expenditure required to keep me. These decisions are almost always rooted in logic and practicality, not who the boss likes the least. And who knows, maybe it'll be the best thing that ever happened to you.